Environmental Uncertainty

Degree of complexity
Degree of change
3.1 Environmental Uncertainty p. 53
Some Important Variables in the
Societal Environment
3.2 Some Important Variables in the Societal Environment (Table 3.1) p. 55
Economic
GDP trends
Interest rates
Money supply
Inflation rates
Unemployment levels
Wage/price controls
Devaluation/revaluation
Energy availability and
cost
Disposable and
discretionary income
Technological
Total government
spending for R&D
Total industry spending for
R&D
Focus of technological
efforts
Patent protection
New products
New developments in
technology transfer from
lab to marketplace
Productivity improvements
through automation
Political-Legal
Antitrust regulations
Environmental protection
laws
Tax laws
Special incentives
Foreign trade regulations
Attitudes toward foreign
companies
Laws on hiring and
promotion
Stability of government
Sociocultural
Lifestyle changes
Career expectations
Consumer activism
Rate of family formation
Growth rate of population
Age distribution of
population
Regional shifts in
population
Life expectancies
Birth rates
1998 Addison Wesley Longman, Inc. TM-59
GIVE AN EXAMPLE IN EACH
CATEGORY OF SOCIETAL
ENVIRONMENT

ECONOMIC
TECHNOLOGICAL
POLITICAL-LEGAL
SOCIOCULTURAL


Scanning the External Environment
3.3 Scanning the External Environment (Fig. 3.1) p. 60

Analysis of Societal Environment
Economic, Sociocultural, Technological, Political-Legal Factors
Selection of
Strategic Factors
Opportunities
Threats
Market
Analysis
Competitor
Analysis
Supplier
Analysis
Governmental
Analysis
Interest Group
Analysis
Community
Analysis
Strategic Issues and
Strategic Factors
Strategic Issues

Trends likely to affect future environment
Strategic Factors

Those strategic issues with high probability of
occurrence and high probable impact on
corporation
3.4 Strategic Issues and Strategic Factors p. 59
Critical Success Factors and
Strategic Group

Critical Success factors are:
those strategic factors that you must do
correctly to succeed with a strategy.

Strategic Group are:
those business units pursuing similar
strategies with similar resources.


3.4 Strategic Issues and Strategic Factors p. 59
Issues Priority Matrix
3.5 Issues Priority Matrix (Fig. 3.2) p. 61
High
Priority
High
Priority
High
Priority
Medium
Priority
Medium
Priority
Medium
Priority
Probable Impact on Corporation
Low
Priority
Low
Priority
Low
Priority
Low Medium High
P
r
o
b
a
b
i
l
i
t
y

o
f

O
c
c
u
r
r
e
n
c
e

Source: Adapted from L. L. Lederman,
Foresight Activities in the U.S.A.: Time
for a Reassessment? Long Range
Planning (June 1984), p. 46. Copyright
1984 by Pergamon Press, Ltd. Reprinted
with permission.
Forces Driving Industry Competition
3.6 Forces Driving Industry Competition (Fig. 3.3) p. 62
Threat
of New
Entrants
Bargaining
Power
of Suppliers
Bargaining
Power
of Buyers
Relative
Power
of Unions,
Governments,
etc.
Potential
Entrants
Threat of
Substitute
Products
or Services
Industry
Competitors

Rivalry Among
Existing Firms
Other
Stakeholders
Buyers
Substitutes
Suppliers
Source: Adapted/reprinted with permission
of The Free Press, an imprint of Simon &
Schuster, from Competitive Strategy:
Techniques for Analyzing Industries and
Competitors by Michael E. Porter. Copyright
1980 by The Free Press.
Some Barriers to Entry:
Economies of Scale
Product Differentiation
Capital Requirements
Switching Costs
Access to Distribution Channels
Cost Disadvantages Independent of Size
Government Policy
3.7 Some Barriers to Entry p. 6263
Rivalry Among Existing Firms
Intense Rivalry is Related To:

Number of Competitors
Rate of Industry Growth
Product or Service Characteristics
Amount of Fixed Costs
Capacity
Height of Exit Barriers
Diversity of Rivals
3.8 Rivalry Among Existing Firms p. 63
Continuum of International
Industries
3.9 Continuum of International Industries (Fig. 3.4) p. 67
Multidomestic
Industry in which companies tailor
their products to the specific
needs of consumers in a
particular country.
Retailing
Insurance
Banking
Global
Industry in which companies
manufacture and sell the same
products, with only minor
adjustments made for individual
countries around the world.
Automobiles
Tires
Television sets
Mapping Strategic Groups in the U.S.
Restaurant Chain Industry
3.10 Mapping Strategic Groups in the U.S. Restaurant Chain Industry (Fig. 3.5) p. 69
Product-Line Breadth
High
Low
Limited Menu Full Menu
Arby's Wendy's
Domino's Dairy Queen
Hardee's Taco Bell
Burger King McDonald's
Shoney's
Denny's
Country Kitchen
Kentucky Fried Chicken
Pizza Hut
Long John Silver's
Ponderosa
Bonanza
Perkins
International House
of Pancakes
Red Lobster
Olive Garden
ChiChi's
P
r
i
c
e

Strategic Types
Defenders
Prospectors
Analyzers
Reactors
3.11 Strategic Types p. 68
Industry Matrix
3.12 Industry Matrix (Table 3.3) p. 71
Strategic Factors Weight
Company A
Rating
Company A
Weighted Score
Company B
Rating
Company B
Weighted Score
1 2 3 4 5 6
Total 1.00
Source: T. L. Wheelen and J. D. Hunger, Industry Matrix. Copyright 1997 by Wheelen and Hunger Associates. Reprinted by
permission.
The Role of Forecasting
3.13 The Role of Forecasting
Environmental
Scanning
Present
Trends and
Fashions
Forecasting
Future Trends
and Fashions
Assumptions
for Strategic
Planning and
Decision Making
Popular Forecasting Techniques
Extrapolation
Brain storming
Expert opinion
Statistical modeling
Scenario writing
3.14 Popular Forecasting Techniques p. 7374
Industry Scenarios
1. Examine possible shifts in societal variable globally.
2. Identify uncertanties in each of the six forces of the task
environment.
3. Make a range of plausible assumptions about future
trends.
4. Combine assumptions into internally consistent scenarios.
5. Analyze the industry situation under each scenario.
6. Determine sources of competitive advantage under each
scenario.
7. Predict competitors behavior under each scenario.
8. Select most likely scenario to use in strategy formulation.
3.15 Industry Scenarios p. 75
External Factor Analysis Summary (EFAS)
3.16 External Factor Analysis Summary (EFAS): Blank p. 76
External
Strategic Factors Weight

Rating
Weighted
Score Comments
1 2 3 4 5
1.00
Opportunities




Threats




Total Weighted Score
Notes: 1. List opportunities and threats (510 each) in column 1. 2. Weight each factor from 1.0 (Most Important) to 0.0 (Not Important) in Column 2
based on that factors probable impact on the companys strategic position. The total weights must sum to 1.00. 3. Rate each factor from 5 (Outstanding)
to 1 (Poor) in Column 3 based on the companys response to that factor. 4. Multiply each factors weight times its rating to obtain each factors
weighted score in Column 4. 5. Use Column 5 (comments) for rationale used for each factor. 6. Add the weighted scores to obtain the total weighted
score for the company in Column 4. This tells how well the company is responding to the strategic factors in its external environment.
Source: T. L. Wheelen and J. D. Hunger, External Strategic Factors Analysis Summary (EFAS). Copyright 1991 by Wheelen and Hunger Associates.
Reprinted by permission.
External Factor Analysis Summary (EFAS):
Maytag as Example
3.17 External Factor Analysis Summary (EFAS): Maytag as Example (Table 3.4) p. 76
External
Strategic Factors Weight

Rating
Weighted
Score Comments
1.00
Opportunities
Economic integration of
European Community
Demographics favor quality
appliances
Economic development of Asia
Opening of Eastern Europe
Trend to Super Stores
Threats
Increasing government regulations
Strong U.S. competition
Whirlpool and Electrolux strong
globally
New product advances
Japanese appliance companies

Total Scores

.20

.10

.05
.05
.10

.10
.10
.15

.05
.10

4

5

1
2
2

4
4
3

1
2

.80

.50

.05
.10
.20

.40
.40
.45

.05
.20

Acquisition of
Hoover
Maytag quality

Low Maytag presence
Will take time
Maytag weak in this
channel
Well positioned
Well positioned
Hoover weak globally

Questionable
Only Asian presence is
Australia

3.15
1 2 3 4 5